IMF to cut global growth outlook over coronavirus

The International Monetary Fund (IMF) is cutting its global growth forecasts over the coronavirus outbreak.

IMF managing director Kristalina Georgieva said the global economic outlook has shifted to “more dire scenarios” as the virus has spread undetected, though she added it is still difficult to predict the impacts.

“The moment it became clear it is no more just about China and maybe a small number of countries in Asia surrounding China, then the outlook on what the impact could be changed.”

European finance ministers have also been warned that the outbreak threatens to plunge both France and Italy into recession, and the ripples from a prolonged outbreak could incite a “vicious” spiral of declining markets.

“A longer and more widespread epidemic could have a disproportionate negative impact through uncertainty and financial-market channels,” according to a European Commission briefing note on the economic impact, seen by Bloomberg.

“Cascading effects could stem from liquidity shortages in firms that have to stop production, amplified and spread out by financial markets,” it said.

The briefing paper for the region’s finance ministers provided the basis for a call between them on Wednesday to discuss their collective responses.

The ministers spoke a day after the Group of Seven stopped short of coordinated action to support economies, and the US Federal Reserve sprung a surprise 50 basis point interest-rate cut.

The aviation sector continues to be severely impacted by the coronavirus outbreak.

Lufthansa will ground 150 aircraft out of its total fleet of around 770 due to the corona-virus, the German airline said, confirming what company sources had told Reuters earlier.

European airline bosses warned on Tuesday that the worst is still to come for the airline industry in terms of economic damage from the coronavirus outbreak.

However, they predicted that travel demand could stabilise in the coming weeks.

Despite the global impact of coronavirus, US stocks on Wall Street yesterday surged, with healthcare stocks providing the biggest boost after Joe Biden overtook Bernie Sanders to become the new front-runner in the race for the Democratic presidential nomination.

The benchmark S&P 500 rose for only the second time in 10 days, taking back more than half of a nearly 3% slide in the previous session, when an emergency interest rate cut by the Federal Reserve served only to amplify concerns about the economic damage of the outbreak.

European shares rose also rose yesterday, with defensive sectors gaining the most as investors grappled with the efficacy of monetary stimulus in offsetting the economic impact of the coronavirus.

The pan-European Stoxx 600 index rose 1.4%, with the utilities and telecom sectors leading gains.